Lotte Hi-Mart, Despite Weak Air Conditioner Sales, Strong Expectations for Q3 Increase

Poor Sales During Longest July Rainy Season
Continued Efforts to Reduce Fixed Costs Including SG&A Expenses

[Image source=Yonhap News]

[Asia Economy Reporter Cha Min-young] Lotte Hi-Mart, which posted an earnings surprise (better-than-expected performance) in the second quarter, is expected to continue its profit growth trend in the third quarter. However, sales growth is anticipated to be modest as air conditioner sales, which act as a driving force, slowed down due to the longest rainy season on record.

According to financial information provider FnGuide on the 17th, Lotte Hi-Mart is estimated to achieve separate sales of 1.0163 trillion KRW in the third quarter of this year. This represents an increase of about 3.3% compared to the same period last year. Operating profit for the same period is expected to rise by approximately 20.1% to 40.1 billion KRW.

Sales are expected to decline initially. The securities industry estimates that air conditioner sales in July this year decreased by about 40-50% compared to the previous year due to the longest rainy season. However, most other home appliances such as TVs, refrigerators, and dehumidifiers showed double-digit growth.

Additionally, sales decline due to store efficiency improvement efforts is expected to be reflected. Lotte Hi-Mart announced that it will reduce a total of 15 stores this year, with 8 new openings and 23 closures. The online share is also increasing as part of the omnichannel strategy. However, operating profit is expected to increase by more than 20% as a result of restructuring efforts.

Yoo Jung-hyun, a researcher at Daishin Securities, analyzed, "Contrary to initial expectations, heavy rain continued, and air conditioner sales in the third quarter are understood to have decreased by 50% compared to the previous year, but overall large home appliance sales are better than expected," adding, "It is expected to continue the profit growth trend in the third quarter."

Cha Jae-heon, a researcher at DB Financial Investment, also said, "Due to poor air conditioner sales in July and August, it is difficult to expect significant sales growth in the third quarter, but sales are expected to reach last year's level due to increased premium home appliance sales and home appliance rebate policies," adding, "In particular, with the shop-in-shop restructuring, the promotion cost ratio is stabilizing, and the trend of operating profit improvement is expected to continue in the second half of this year and next year."

Nam Sung-hyun, a researcher at Hanwha Investment & Securities, said, "We expect profitability improvement rather than scale expansion in the second half," adding, "Operating profit is expected to be relatively stable due to structural efforts to reduce selling and administrative expenses and the effects of closing non-profitable stores."

Meanwhile, Lotte Hi-Mart posted sales of 1.1157 trillion KRW in the second quarter, showing a 4.2% improvement compared to the same period last year. Operating profit reached 69.3 billion KRW, a remarkable increase of 51.1%. The sales growth is attributed to the effect of the top-efficiency home appliance rebate policy, growth in high-efficiency premium home appliances, PC sales growth due to online classes and remote work, and increased demand for TV appliances due to longer home stay times.

This content was produced with the assistance of AI translation services.